In Re Marquam Investment Corporation, Debtor. Susan Brewer v. Erwin & Erwin, P.C. , 959 F.2d 800 ( 1992 )

ORDER

After receiving a favorable decision m the case in chief (In re Marquam Inv. Corp., 942 F.2d 1462 (9th Cir.1991)), the plaintiff-appellee seeks attorney fees against the appellant pursuant to Rule 38 of the Federal Rules of Appellate Procedure, which provides that “[i]f a court of appeals shall determine that an appeal is frivolous, it may award just damages and single or double costs to the appellee.” Fed.R.App.P. 38 advisory committee note states that damages may be awarded in frivolous appeals as a matter of justice to the appellee and as a penalty against the appellant.

In our reported opinion on the case in chief, we affirmed the district court’s ruling and declared that the bankruptcy court clearly erred in finding that Marquam agreed to pay the Erwin law firm for any legal services. In re Marquam, 942 F.2d at 1466.

First, we agreed with the district court that it was clear beyond dispute that the Erwins were insiders in the Marquam corporation as a matter of law. The Supreme Court in Pepper v. Litton, 308 U.S. 295, 60 S.Ct. 238, 84 L.Ed. 281 (1939) declared that an insider must prove the good faith of the transaction and its inherent fairness. There were no billing or corporate documents evidencing a debt for attorney fees, nor were there any accounts receivable or billings for legal services. In re Marquam, 942 F.2d at 1466. The bankruptcy court acknowledged that “all we have is the testimony of Charles Erwin that such (legal services for pay) was the intent.” Id. at 1464. Nevertheless, despite the lack of documentary evidence in a situation where the burden was on appellant to show the good faith of the transaction, the bankruptcy court allowed the claim for attorney fees. The district court overturned this ruling, and we easily affirmed. We also pointed out that the reasoning of the bankruptcy court was a flawed syllogism that not only defied elementary precepts of logic but also fundamental purposes of contract law. Id. at 1466. With this factual and legal background, any appeal from the district court’s reversal of the bankruptcy court was beyond doubt frivolous to the extreme. See McConnell v. Critchlow, 661 F.2d 116, 118 (9th Cir.1981) (appeal is frivolous when result is obvious or appellant’s arguments of error are wholly without merit).

The appeal of the appellant to this court is frivolous within Fed.R.App.P. 38, and the request for attorney fees of $5,058.75 is reasonable and just.

It is therefore ordered that the amount of $5,058.75 is awarded to the appellees against the appellant Erwin & Erwin, P.C. as damages pursuant to Rule 38 of the Federal Rules of Appellate Procedure.